Banks guilty of laundering

Fifteen British-based banks were yesterday censured by City regulators for flouting anti-money laundering rules after a three-month investigation into 42 accounts linked to former Nigerian president General Sani Abacha.

The City of London police is now expected to open an investigation into how almost £1bn was moved between a total of 23 British-based banks that held accounts for the family of the former president, who died from an overdose of Viagra in 1998.

The investigation by the financial services authority, made public yesterday, followed criticism that money laundering controls failed to prevent as much as £3bn being looted by the former president from his country.

In a strongly worded warning to the City to clean up its act, the FSA said it had found 15 of the 23 banks had "significant" control weaknesses and that seven of these had been set strict deadlines to rectify their proceedings for dealing with suspected money laundering which must be reported to the national criminal intelligence service.

The regulator refused to identify the banks other than to say they included British ones and branches of banks inside and outside the European Union.

Nigerian sources, however, named a number of banks including Barclays, HSBC, NatWest, Royal Bank of Scotland as well as US ones such as Citibank, Merrill Lynch, and First Bank of Boston as having been investigated. This is not to say they were among those censured by the FSA yesterday. Most are thought to concern branches in London, including Golders Green, Knightsbridge and St John's Wood. One branch is understood to be in Leeds.

Phillip Thorpe, managing director of the FSA, said: "The extent of the weakness is frankly disappointing... potential breaches of money laundering regulations also being discussed with the appropriate law enforcement authorities".

A spokesman for the City of London police confirmed the force was reviewing the information. "It is envisaged a police investigation will ensue in due course," the spokesman said yesterday.

The serious fraud office is also continuing to provide information requested by the Swiss authorities, which last year found that $213m of Abacha assets flowed from London to Switzerland.

The Swiss regulator reprimanded six Swiss-based banks and froze assets in Switzerland while a local prosecutor seeks to press money laundering charges and to seize the money. The Nigerians formally asked the Home Office to freeze Abacha-related assets in Britain last June, but it is feared that with the case still under consideration the remaining money may have been removed.

The FSA said that while the turnover on the 42 accounts was $1.3bn for the four years between 1996 and 2000 this did not necessarily mean that it was the proceeds of crime or the total amount of money received into Britain.

It is now thought that about $900m came from Switzerland to British shores during the 1990s, making the two countries a key platform for the rest of the global web of alleged money laundering.

More than 18 months after they started following the paper trail in Switzerland, then spreading out to other countries, the lawyers continue to be astonished by what they find. There is evidence of direct payments from the Central Bank in Nigeria, cash and travellers cheques smuggling, as well as the possible proceeds of corruption. $2.2bn was taken from the Central Bank alone.